I am a Managing Partner at Brookside Strategies, LLC, an energy and utility management consulting firm based in Darien, Connecticut. I've spilled blood, sweat and tears grappling with the full spectrum of barriers and misconceptions about distributed generation and energy-efficiency technologies. Previously, I practiced law in New York City at Paul Weiss Rifkind Garrison & Wharton, LLP and Jenner & Block, LLP. I also attended journalism school at Columbia University and earned a JD at Stanford Law School. I've written about energy and environmental issues for Forbes, The Nation, Mother Jones and several other publications. I am the Chair of the Northeast Clean Heat and Power Initiative. Drop me a line - or two - at wmp@cleanbeta.com.

The Coming Food Crisis: Blame Ethanol?

A series of spikes in global food prices resulted in riots in 2008 and contributed to violent uprisings in North Africa and the Middle East in 2011. The culprit is a matter of considerable and frequently heated debate, but the most commonly cited candidates include market speculators, global warming and aggressive government renewable fuel mandates.

In an updated version of a paper first published in September, Marco Lagi, Yavni Bar-Yam and Yaneer Bar-Yam considered the possible consequences of the prolonged drought in the mid-western United States, the worst in half a century, on global food prices. The analysis, which relied on a quantitative model of historical food prices, concluded that the drought could amplify the impact of market speculation and corn-to-ethanol conversion policies on the impending global food crisis by an order of magnitude. To

Recent droughts in the mid-western United States threaten to cause global catastrophe driven by a speculator amplified food price bubble. Here we show the effect of speculators on food prices using a validated quantitative model that accurately describes historical food prices. During the last six years, high and fluctuating food prices have led to widespread hunger and social unrest. While the spring of 2012 had a relative dip in the food prices, a massive drought in the American mid-west in June and July threatens to trigger another crisis . . .

An update to the original paper in February 2012 demonstrated that the model previously published . . . anticipated a new food crisis by the end of 2012 if adequate policy actions were not implemented. Here we provide a second update, evaluating the effects of the current drought on global food prices. We find that the drought may trigger the expected third food price bubble . . . to occur earlier than otherwise expected, beginning immediately . . . [and] rais[ing] prices well beyond an increase justified by the reduced supply caused by the droughts.

In other words, the sky may soon fall for those poor souls who are unable to stomach the marginal increase in food prices. At risk of reiterating the obvious, malnutrition is a matter of life or death.

Everyone agrees that we should not support policies that result in food shortages. The trouble is that nobody agrees what policies are to blame. The NECSI analysis fingers biofuels first and speculators second: “The model showed that, of all the factors proposed to be responsible for the recent dramatic spikes and fluctuations in global food prices, rapid increases in the amount of corn-to-ethanol conversion and speculation on futures markets were the only factors which could justifiably be held responsible.”

We are making ethanol from corn because we have corn to make ethanol from. We have corn to make ethanol from because the farmers that grow the corn can sell their corn for enough money to cover their expenses and have enough left over to be worth the effort to grow the corn. Up until now—we have been using up to about 35% of the corn crop to produce ethanol. Ethanol comprises about 10% of our gasoline supply in the form of E10.

If we do not make ethanol from corn—you will increase the availability of corn 35%. A basic assumption of this study is, that ethanol is raising the price of corn by reducing the supply of cheap corn available for use in foods. Therefore, if you do not use corn to make ethanol, food will become cheaper. But, if you reduce the market for corn by 35%—-the probable result is that most corn farmers will not be able to cover their expenses. They will have to go out of business. Next year, you will have no corn, no ethanol and no food. You will also have 10% less gasoline available. The last time you had a spike in the price of petroleum, it nearly doubled in price. The price went down when the recession created a 3% decrease in demand. So, a 3% shift in demand = roughly 2X rise in the price of petroleum crude.

Do we want no ethanol, no food, no corn, $35/gal gasoline, and a recession much worse than we are just now recovering from?

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———” The NECSI analysis fingers biofuels first and speculators second: “The model showed that, of all the factors proposed to be responsible for the recent dramatic spikes and fluctuations in global food prices, rapid increases in the amount of corn-to-ethanol conversion and speculation on futures markets were the only factors which could justifiably be held responsible.”

hmmm???”———–

We are making ethanol from corn because we have corn to make ethanol from. We have corn to make ethanol from because the farmers that grow the corn can sell their corn for enough money to cover their expenses and have enough left over to be worth the effort to grow the corn. Up until now—we have been using up to about 35% of the corn crop to produce ethanol. Ethanol comprises about 10% of our gasoline supply in the form of E10.

If we do not make ethanol from corn—you will increase the availability of corn 35%. A basic assumption of this study is, that ethanol is raising the price of corn by reducing the supply of cheap corn available for use in foods. Therefore, if you do not use corn to make ethanol, food will become cheaper. But, if you reduce the market for corn by 35%—-the probable result is that most corn farmers will not be able to cover their expenses. They will have to go out of business. Next year, you will have no corn, no ethanol and no food. You will also have 10% less gasoline available. The last time you had a spike in the price of petroleum, it nearly doubled in price. The price went down when the recession created a 3% decrease in demand. So, a 3% shift in demand = roughly 2X rise in the price of petroleum crude.

Do we want no ethanol, no food, no corn, $35/gal gasoline, and a recession much worse than we are just now recovering from?

That is what the mathematical model presents to me.

Obviously, this seems to me to be a highly undesirable outcome.

So, what do we do? The answer seems to me to be ridiculously simple.

Since making less ethanol presents such a dire picture—-let’s try making MORE ethanol.

We are not limited to how much corn we can grow. We can plant more corn. But we are limited in the amount of land available that we can plant corn on. Especially, if the drought continues.

Fortunately, we are not limited to what we can make ethanol from. We do not have to use corn—we can other things. Other things that grow well where corn does not. Things like sugarcane. We’ve been making ethanol for cenuries from sugarcane—it is called rum. And where we can’t grow sugarcane, we can grow sugar beets. Sugar beets produce exactly the same thing that sugarcane does. Sucrose. Beets have about the same productivity as sugarcane. We already know that Brazil powers their economy on ethanol produced from sugarcane. About 50% of their transportation fuel is ethanol grown on about 2-3% of their arable land. I’ve never heard of any credible study that says people will be starving worldwide because we planted 3% of available cropland as sugarcane or sugar beets. Oh, and by the way, sugar beets grow well in any area of the US with adequate soil and moisture—including Alaska. We can even make ethanol from native desert adapted plants—-drought does not hurt plants adapted to live in desert conditions. The plant is agave(called cactus, but actually a succulent). We have LOTS of unused desert land available—even more if the drought continues. We’ve been making ethanol from agave for hundreds of years—-it is called tequila. Agave produces as much or more sugar per acre as either suarcane or sugar beets.

When you pay $1 for groceries at the supermarket—out of that $1 only about 12-14 cents goes to the farmers that produced the commodities that went into the foods that you buy. About 35 cents goes to pay for energy to make, transport, process, and preserve the products. If the price of oil goes up—so will the price of the food you buy—-and about 3X faster than it will if the price of the base commodities increases. ALL foods—not just some.

We need to make more ethanol, not less ethanol.

We wil have lower prices for food if we replace petroleum with ethanol.

What should we make ethanol from? All of the above. And other things as well. The more and differing sources we have in producing ethanol, the greater our flexibility can be in the event of changing conditions, like droughts, floods or anything else that changes market dynamics.

The New England Complex Systems Institute sounds to me like a rooty tooty heavy duty bunch of experts with more degrees than a thermometer.

The Energy Return on Energy Invested (ERoEI) for ethanol is about 1.6. Compare that to an ERoEI of about 9 for oil, and 20 to 40 for wind and solar. Making more ethanol just digs us deeper into a hole.

Time to stop burning toxic fuels and transition to cleaner renewables. The US can lead, when it chooses to. Humanity will beat a path to the door of the innovators that help get us out of this carbon spiral.

I have seen numbers similar, or much worse than the 1.6 unit of energy from ethanol for each unit of energy invested in making the fuel. Is it possible to calculate a similar value for a unit of energy in the form of gasoline? Obviously it takes a lot of energy to haul crude from half way around the world, to refine it, and to transport it to the consumer.

The law of supply/demand applies: lower the demand for a product, then the producers have fixed cost to cover. In order to cover the increased unit cost, then the producer raises price.

Today’s drought impacted 95 million acres of corn, let’s say resulting in 85 million acres will be harvested. Let’s say 35 million worth of harvest was to go for ethanol, then food/feed/exports would get 50 millions acres worth. For argument sake, let’say we had eliminated [before the drought, ie in 2011] 100% of corn-to-ethanol as part of the corn planting plans. We would have planted 60 million acres (instead of 95mil). Wih the same drought, in that case, we would have harvested only40 million acres for food and feed. Why? This is because the northern acres we expended into in the last years to support ethanol , and where we will get our ‘extra corn’ this season would not be in the corn business at all.

The solution: We are better off planting as much corn as we can to meet the needs of fuel. But in an emergency like now, we need to be flexible enough to use the ‘corn used for fuel’ as a buffer when we need to keep prices within ‘ an affordability zone’. To implement such a policy, we all need to provide the ethanol industry a fee for taking down production when we all prefer to switch the use of available corn away from ethanol but toward food and feed. This fee would only apply during an emergency period.

William you are asuming ethanol is 100% replacement for gas, when making ethanol it takes one unit fossil fuel to get 1.3 units ethanol. Ethanol has 30% less energy resulting in a loss in energy (1 gas – .91 ethanol). William the ethanol program is probably one of the worst programs this govermant has enacted. Without politcal ties and mandates it would not exist. E85 cost 10-20% more to use in flex vehicles, add in the abuse it causes on engines. This should be ethanols shining star and yet the demand is going down. There is even a better story on cellustis ethanol. 1.5 billion invested in cellustic ethanol plants and none being produced to date. Oil companies are mandated to use cellustic ethanol and are being fined 6.8 million for a product that does not exist. Goverment involvement has been a disaster. Mandates need to be removed and let the market correct itself.

@ Stephanie, Thanks for your comment. I agree with many of your concerns about the federal government’s ethanol mandates, but I disagree with your proposed solution. Ironically, the market is arguably worse than the government at managing the supply and demand of transportation fuels. The Standard Oil Corporation admitted that commodities markets are not reliable indicators of the state of supply and demand a very long time ago. I believe the link between market prices and supply/demand realities has deteriorated so dramatically over the past two or three decades that government has rightfully reinserted itself into managing the market. Perfect? No, but better than the alternative. For better or worse, $1.5 billion in R&D funding is a rounding error in the world’s oil economy. A single oil company (Shell or BP?) spent more than $1 billion constructing a single oil production vessel. If anything, the problem with cellulosic ethanol research has been chronic UNDER funding. I pay a non-trivial amount of my disposal income on gasoline and so do the majority of Americans. Fifteen years ago, I spent a fraction of what I spend today. If this does not change, the U.S. economy will pay a steep price. Every penny I spend supporting the production and transportation of oil from remote regions of Siberia my local gas station is a penny taken away from my neighbors, my children and myself. I work hard and I want my children to have a good life and the world to be a better place. The oil economy is like a parasite feeding on the future of my country. Time to tear off the band-aid.

William we are eporting oil to china. The xl pipeline use would be mainly to export more oil to china. Ethanol until they find a cost effective source is a poor alternative. Natural gas seems to be a far better alternative at the present. Burning up a food supply is a poor choice. Farmers need to earn a living, we need to keep food cost affordable and make sure the farmers can make a living at the same time.

The Fiat Siena Tetrafuel is made by Fiat in Brazil for the Brazil and Argentina markets. The Siena can run on petroleum gasoline, gasoline and ethanol mixtures, pure hydrous ethanol(straight from the still, unblended) and/or CNG(compressed natural gas, methane, CH4, either fossil or bio). The Siena has an onboard computer that senses and adjusts fuel consumption to meet road conditions and demands, and also preferentially use the least expensive fuel first. It automatically switches fuels and matches air intake. The only thing the driver does is key in the fuel price when filling. The Siena MSRP is about $5,000 less than the Toyota Prius. The difference is, the Siena can be run for the lifetime of the vehicle, and never use a single drop of petroleum.

If all new vehicles came equipt with the technology used on the Siena, consumers would have complete freedom to choose what fuel, or fuels they want to use.